A Place to Call Your Own: the history of mortgages (Part I)

POSTED: 7th April 2014

IN: Personal News

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In recent years, the mortgage market has received unprecedented attention due to its increasingly elusive entry-level steps.

Thanks to a number of factors, including an exponentially rising population, changing lifestyles, lack of land availability and wages not keeping pace with the growth in house prices, the face of the housing market has fundamentally altered.

And there's a problem - we're clean out of houses. As the Government prepares legislation that will herald the start of a new house-building drive (it intends to support the building of a total of three million new homes by 2020), in this two-part blog, Aldermore Bank asks Manchester University Social History PhD candidate, Paula Chorlton, where the idea of ownership came from anyway and how the changing face of British home life has transformed the housing market for the years to come.

Introduction

Housing is an important topic for an urbanised country, and it reveals much about broader social attitudes and lifestyles. Just as wider social values affect the definition of, for example, overcrowding, optimum room sizes, or access to light, they also affect our feelings about what we call home. Changes in tenure have long been understood by historians as linked to national politics and the economy.

The desire to own one's own home as an owner-occupier is not universal, but it is an important social value which continues to impact upon our attitudes towards different geographical areas, the economy, and the performance of the Government of the day. Home ownership is understood to provide a measure of security and stability, particularly when compared with private renting.

Security and stability are linked not only to personal feelings about owning bricks and mortar, but broader confidence in the economic performance of the country as a whole. These may be reasons why a defective housing market, such as that of the early twentieth century or the negative equity issues encountered in the 1990s, become a concern for a wide range of the population - home-owners or no - prompting politicians to pay attention.

How Britain turned from a housing market dominated by private renting, to one dominated by owner-occupiers within 100 years is a question that has fascinated historians over the past 40 years.

Home ownership: a basic ambition

Despite being a relatively new concept, home ownership is now considered to be a basic British ambition. In the UK, we know that in 1900 about 90% of the population lived in rented property. It was only during the 20th century that home ownership came into its own, with around 27% of the population owning their own house by 1939, and by 1988, private rental property accounting for just 8% of housing stock.

Despite the fact that the inception of the Buy-to-Let mortgage in 1996 prompted a resurgence in the proportion of houses rented by private landlords (which now stands at around 15%) and in spite of some recent turbulent years for the housing market, home ownership is still at the forefront of British aspiration.

But just where did this idea of property ownership come from?

Mort Gage ("Dead Pledge"): A Potted History

No one is certain when the first mortgage was recorded. However, we know that according to the Oxford History of the Laws of England, the classic mortgage at the beginning of the Tudor period was the right to ownership (feoffment) on the condition of repayment. Essentially, the lender granted the fee to the borrower on the condition that he might take possession of the property (re-enter) if he paid the debt on time.

It sounds simple enough, but these early agreements were dogged by a series of complications, most commonly in the eventuality of death. To illustrate, if the borrower was to pass away before the day of payment, his heir would gain possession in exchange for continued payment. However, if there was no agreed date of payment, the lender could keep the land.

On the other hand, if the lender died before the date of payment, the land would then descend tohisheir and, in either case, would commonly become the focus of dower and feudal issues.

In subsequent years, these problems were gradually ironed out. However this later account of a 500-year mortgage deed from the 17th Century, catalogued by the University of Nottingham, shows how complicated mortgage agreements could get.

In the instance that a lender wanted to recover his money, but the borrower couldn't pay, the lender would assign the mortgage to another person. This third party would pay the money owed, whilst the borrower would be left with a new debt collector to deal with and more interest to pay. In this example concerning the Manor of Cawkwell, Leicestershire, the mortgage was assigned no less than seven times over a 34-year period before eventually being paid off by the Duke of Newcastle in 1707.

Although just a tiny snippet of the long history of the mortgage, these accounts illustrate the concept's early usage and development, which would predominantly have been for matters concerning land - and perhaps offer an insight into why they didn't become popular until the late 19th century.

Check back to the Aldermore blog next week, when we'll take a look at how the concept of home ownership has become engrained into British life over the last century in part II of this series.

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